RZBC Grp. Shareholding Co. v. United States

100 F.Supp.3d 1288

RZBC GROUP SHAREHOLDING CO., LTD., RZBC Co., Ltd., RZBC Imp. & Exp. Co., Ltd., and RZBC (Juxian) Co., Ltd., PlaintiffsandGovernment of China (MOFCOM), Plaintiff–Intervenor

v. UNITED STATES, DefendantandArcher Daniels Midland Company, Cargill, Incorporated, and Tate & Lyle Ingredients Americas, Defendant–Intervenors.

Slip Op. 15–83.

Court No. 14–00041.

United States Court of International Trade.

Aug. 5, 2015.

Michael S. Holton, Husch Blackwell LLP, of Washington, DC, argued for plaintiffs. With him on the brief was Jeffrey S. Neeley.

Andrew T. Schutz, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of Washington, DC, argued for plaintiff-intervenor. With him on the brief was Francis J. Sailer.

Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for defendant. With her on the brief were Carrie A. Dunsmore, Trial Attorney, Joyce M. Branda, Acting Assistant Attorney General, and Jeanne E. Davidson, Director. Of counsel on the brief was Whitney M. Rolig, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC.

Patrick J. Togni, King & Spalding LLP, of Washington, DC, argued for defendant-intervenors. With him on the brief was Joseph W. Dorn.

OPINION AND ORDER

GOLDBERG, Senior Judge:

This case concerns the third administrative review of a countervailing duty order on citric acid and certain citrate salts from the People's Republic of China (“China” or “the PRC”). See Citric Acid and Certain Citrate Salts from the People's Republic of China, 79 Fed.Reg. 108 (Dep't Commerce Jan. 2, 2014) (final admin. review) (“Final Results ”) (covering imports from January 1 to December 31, 2011). Plaintiffs, the RZBC Group Shareholding Co. and related companies (“RZBC” or “Plaintiffs”), sue to reduce the final countervailing duty rate imposed on them by the U.S. Department of Commerce (“Commerce” or “the agency”). The Government of the People's Republic of China, Ministry of Commerce (the “GOC” or “Plaintiff–Intervenor”), also sues, making arguments above and beyond those lodged by RZBC. Constituents of the U.S. domestic industry—including Archer Daniels Midland Company, Cargill, Incorporated, and Tate & Lyle Ingredients Americas (the “Defendant–Intervenors”)—side with the agency in defending the countervailing duty rate against these attacks.

After carefully considering the parties' briefs and the record, the court remands one issue to Commerce for reconsideration: the calculation of world benchmarks for the steam coal, sulfuric acid, and calcium carbonate subsidies. The agency must properly address whether to render the benchmarks using weighted averages or simple averages. Otherwise, the court sustains the Final Results in all respects.

GENERAL BACKGROUND

Countervailing duties serve the same purpose as their better-known cousins, antidumping duties: They level the playing field between U.S. manufacturers and their overseas competition. But each regime addresses a different problem. Antidumping duties (“ADs”) were made to fight price discrimination, so if a foreign producer sells goods in the United States for less than in the home market, ADs bring the U.S. price back to fair value. See 19 U.S.C. § 1673 (2012). Countervailing duties (“CVDs”), by contrast, were created to correct the cost-distorting effect of subsidies. When a foreign government lends support to a producer, CVDs boost the producer's U.S. prices to offset the net benefit from the subsidy. See id. § 1671(a).

This appeal challenges the Commerce Department's CVD procedure and calculations from soup to nuts. The background that follows sets the table.

A CVD investigation usually starts with a petition. The purpose of the petition is, quite simply, to alert the agency to the possibility of a subsidy. In this sense, the petition is like a civil complaint. It must allege the rough contours of the subsidy, and it has to contain “information reasonably available to the petitioner supporting those allegations.” Id. § 1671a(b)(1). But Commerce cannot refuse to investigate unless it “is convinced that the petition and supporting information fail to state a claim upon which relief can be granted.” S.Rep. No. 96–249, at 47 (1979), reprinted in 1979 U.S.C.C.A.N. 381, 433. The bar for launching a CVD inquiry is low.

After Commerce accepts a petition and begins investigating, it must decide if the alleged subsidy really exists. By statute, a subsidy may occur when a foreign government “provides a financial contribution ... to a person and a benefit is thereby conferred.” 19 U.S.C. § 1677(5)(B). Financial contributions come in all shapes and sizes, and can include “the direct transfer of funds, ... tax credits or deductions,” and the provision of “goods and services.” Id. § 1677(5)(D). And while all subsidies must spring from a foreign government, it does not matter if “the subsidy is provided directly or indirectly” to the producer. Id. § 1677(5)(C). Commerce can find a subsidy exists even if the foreign authority funneled its donation to the recipient through private parties. See Delverde, SrL v. United States, 202 F.3d 1360, 1366 (Fed.Cir.2000) (“[I]n order to find that a person received a subsidy, Commerce [must] determine that that person received ... a financial contribution and benefit, either directly or indirectly....”).

Once the agency pinpoints a subsidy, it must decide if the subsidy is countervailable, or eligible for CVDs. Because the statute defines “subsidy” so broadly, it is simply impossible to countervail all the benefits that foreign producers take from their governments. (Imagine what chaos would ensue if Commerce tried to slap CVDs on every government loan, tax loophole, and public project in a foreign jurisdiction). For this reason, the law lets Commerce countervail subsidies only if they are “specific.” 19 U.S.C. § 1677(5)(A). A domestic subsidy is specific if the foreign authority limits the pool of recipients by law—a de jure subsidy—or if the subsidy is given to a select number of industries or enterprises—a de facto subsidy. See id. § 1677(5A)(D).

Next, after it's found a specific subsidy, Commerce measures the benefit to the foreign producer or “adequacy of remuneration.” See id. § 1677(5)(E). If a foreign power furnished subsidized goods and services, the agency calculates benefit using the following formula. First, Commerce finds the price that the foreign producer actually paid for the subsidized goods. Second, it determines the price that the producer would have paid had it bought the goods on the open market. See id. § 1677(5)(E)(iv). The agency can do this in at least two ways. It can draw unsubsidized market prices from the producer's home jurisdiction, 19 C.F.R. § 351.511(a)(2)(i) (2015), or it can use “a world market price where it is reasonable to conclude that such price would be available to purchasers in the country in question,” id. § 351.511(a)(2)(ii). If more than one world price is available, the agency can build a market price or “benchmark” by averaging available prices, “making due allowance for factors affecting comparability” to the home country. Id.

Commerce then subtracts the price actually paid for the subsidized goods from the market price. If the former is less than the latter, then the producer garnered a benefit from the subsidy. The agency can levy a CVD on the producer's exports in an amount equal to the net subsidy, expressed as a percentage of the foreign product's U.S. sale price. See 19 U.S.C. § 1671(a).

In the review below, the agency imposed a 35.87% total CVD on RZBC's citric acid exports. Final Results at 109. The duty aimed to offset the benefit RZBC received from steam coal, sulfuric acid, calcium carbonate, land-use, and other subsidies from the Chinese government. See Issues & Decision Mem. (“I & D Mem.”) at 17–37, PD 233 (Dec. 27, 2013) (listing subsidies examined). Now, in their appeal, RZBC and the GOC contest elements of the Final Results, including (1) the agency's decision to investigate calcium carbonate subsidies; (2) the finding that the calcium carbonate subsidy was specific; (3) the decision to countervail subsidies passed through private trading companies; (4) the choice to offset the benefit from real estate not used to make citric acid; (5) the agency's estimation of benchmarks for steam coal, sulfuric acid, and calcium carbonate; and (6) certain adjustments made to the benchmarks for international freight costs. See generally Mem. of Law in Supp. of Pls. RZBC's Mot. for J. on Agency R., ECF No. 44 (“RZBC Br.”); Mem. of Law in Supp. of Pl.-Intervenor's Rule 56.2 Mot. for J. on Agency R., ECF No. 43 (“GOC Br.”).

The court has jurisdiction to hear these claims under 28 U.S.C. § 1581(c). The court must also uphold the agency's results unless they are “unsupported by substantial evidence on the record, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i).

DISCUSSION

In view of these standards, the court must return one matter to Commerce: the calculation of world benchmarks for the steam coal, sulfuric acid, and calcium carbonate subsidies. The Plaintiffs' and Plaintiff–Intervenor's other claims lack merit, so the court sustains the agency's reasoning in all other respects.

I. Commerce Properly Investigated the Calcium Carbonate Subsidy

RZBC's first claim concerns a new subsidy petition filed during the third review period. The petition, lodged by U.S. industry, alleged that RZBC received subsidized calcium carbonate as an input into its citric acid. Commerce accepted the petition and later found a countervailable subsidy, but Plaintiffs argue this was a mistake, because RZBC never used a type of calcium carbonate mentioned in the petition. See RZBC Br. 21–24.

The court finds no flaw in the subsidy allegation or in the decision to investigate.

A. Background

The chemical at issue here, calcium carbonate (CaCO₃), is a...